Lagos — Crude oil prices hit a 14-year record of more than $38 per barrel yesterday in response to concern about tight supply and continuing Middle East violence.
The sharp leap in prices, which was about $4 more than the average $34 per barrel recorded last month, has however, created fears among oil traders engaged in importing fuel for the Nigerian National Petroleum Corporation (NNPC) over the possibility of not meeting the delivery schedules.
Market reports showed that June deliveries for the light sweet crude closed yesterday at $38.75 per barrel on the New York Mercantile Exchange.
This was $13.75 or 55 percent more than the $25 per barrel adopted as the official selling price for Nigeria's crude oil, upon which revenue projections for the 2004 budget was based.
News that five foreign contract workers for Swiss-based energy group ABB, were killed at the weekend by gunmen in Saudi Arabia created fears of supply uncertainty, traders said.
They added that subsequent comments from the US ambassador to Saudi Arabia advising US citizens to leave, kept the international market on edge and sending prices higher.
The International Energy Agency (IEA), energy adviser to 26 industrialized nations, warned yesterday that high oil prices could "inflict substantial damage on the economies of oil-importing countries and on the global economy."
The IEA said there was no relief in sight from high prices.
"The hike in futures prices during the past several months implies that recent oil price rises could be sustained. If that is the case, the macroeconomic consequences for importing countries could be painful," the IEA said.
The trend is, however, posing a nightmare for oil traders with contracts to import petrol for the NNPC as well as major oil marketing companies.
Traders have orders to import 60 cargoes of premium motor spirit (PMS) or petrol for the NNPC for the second quarter (April-June) 2004.
According to one of the traders, the surging crude prices would "surely slow down delivery of the imported cargoes."
"What is being delivered now were ordered in March/April this year," said the trader.
"Half of the total orders expected to be delivered in May and June (this year) may be caught up in the rising oil prices. It is going to be really dicey for importers unless the NNPC is ready to review the contract prices," the trader said.
Industry officials said the current crude prices translate to a landing cost of N50 per litre price of petrol. "With the government not ready to allow a major review in domestic pump prices, it makes it difficult for marketers to engage in importation," said an official.
Local supplies of fuel from the refineries remained at just 25 percent of national demand. The NNPC hopes to raise the level to 70 percent by August this year, by which time the repairs of the four refineries would have been completed.